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Going, going, gone online: SBA revs up its loan sales

Going, going, gone online: SBA revs up its loan sales

By Jason Miller

Mar 03, 2002

The Small Business Administration auctioned more than $400 million in loans in January, and not one bidder raised a hand or waved a paddle. Instead, investors submitted bids online through a secure Web site, creating the largest online government auction ever, SBA officials said.

The agency worked with Hanovertrade.com Inc. of Hanover, N.J., and KPMG Consulting Inc. of McLean, Va., to auction 30,000 small business loans using Hanovertrade.com's network. Hanovertrade.com is a mortgage asset trading company that uses the Web to sell loans.

'We have been trying to use technology in the asset sales program to do it faster, better and cheaper,' said Richard Blewett, SBA director of asset sales. 'We hope this makes it easier for investors to submit bids and cut down the risk of trying to figure out what the market will be doing after you already submitted your bid. We also hope this will increase prices by increasing competition.'

Before using the Web, SBA required investors to mail or hand-deliver their bids. Because investors had to prepare bids in advance, they were wary of how changes in the stock market could affect them.

This way, investors can check the market right up to the auction start, Blewett said.

The asset auction was held in real time using software from Vertical Crossing Co. of New York. Investors registered a week before the auction, and Hanovertrade.com held practice auctions so users could become familiar with the system.

On the day of the sale, investors logged on with passwords and user names. The software uses 128-bit Secure Sockets Layer encryption and stores data in an Oracle database.

Investors bid on eight loan pools. They could see their own and other bids, but the bidders were anonymous. Blewett said there were at least five and no more than nine bidders at any time. On average, auctions lasted about 30 minutes per pool, and there were 325 bids on the eight pools.

SBA joins the Housing and Urban Development Department and Federal Deposit Insurance Corp. in conducting online loan auctions. HUD sold $109 million worth of rehabilitation loans last June, and FDIC sold $200 million in loans last November.

SBA paid no initial costs because Hanovertrust.com receives payment based on a percentage of proceeds from the sales.

'We believe in using technology to have the most advanced asset sales in the country,' Blewett said.